NOTE 12: STOCKHOLDERS’ EQUITY (DEFICIT)

Preferred Stock

As of December 31, 2025 and 2024, the Company has 10,000,000 shares of Preferred Stock authorized, designated as follows: 7,000,000 shares of Series A Preferred Stock authorized, 570,000 shares of Series B Preferred Stock, 20,000 shares of Series C Preferred Stock, and 250,000 shares of Series D Preferred Stock authorized. All shares of preferred stock have a par value of $0.00001.

Series A Preferred Stock

Dividends. Shares of Series A Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and conditions as that of holders of common stock, as may be declared by the Board of Directors.

Conversion. There are no conversion rights.

Redemption. Subject to certain conditions set forth in the Series A Certificate of Designation, in the event of a Change of Control (defined in the Series A Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series A Preferred Stock shall have acquired, in one or a series of related transactions, equity securities of the Company representing more than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to redeem all or a portion of the outstanding Series A Preferred Stock in cash at a price per share of Series A Preferred Stock equal to 100% of the liquidation value.

Voting Rights. Holders of Series A Preferred Stock are entitled to vote on all matters, together with the holders of common stock, and have the equivalent of one thousand (1,000) votes for every share of Series A Preferred Stock held.

Liquidation. Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary, the holders of Series A Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the liquidation value of the Series A Preferred Stock before any distribution or payment shall be made to the holders of any junior securities, and if the assets of the Company is insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of the Series A Preferred Stock shall be ratably distributed among the holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.

The 7,000,000 shares were issued to a former officer of the Company and assigned to Thiago Moura, the former CEO at the time of the acquisition of HUMBL assets by TAP. These shares were repurchased by Brian Foote in the settlement with Mr. Moura.

Series B Preferred Stock

Prior to the amendment of the Certificate of Incorporation on October 29, 2021, the criteria established for the Series B Preferred Stock was as follows:

Dividends. Shares of Series B Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and conditions as that of holders of common stock, as may be declared by the Board of Directors.

Conversion. Each share of Series B Preferred Stock shall be convertible at the option of the holder thereof at any time after December 3, 2021 at the office of the Company or any transfer agent for such stock, into ten thousand (10,000) fully paid and nonassessable shares of common stock subject to adjustment for any stock split or distribution of securities or subdivision of the outstanding shares of common stock.

Redemption. Subject to certain conditions set forth in the Series B Certificate of Designation, in the event of a Change of Control (defined in the Series B Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series B Preferred Stock shall have acquired, in one or a series of related transactions, equity securities of the Company representing more than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to redeem all or a portion of the outstanding Series B Preferred Stock in cash at a price per share of Series B Preferred Stock equal to 100% of the liquidation value.

Voting Rights. Holders of Series B Preferred Stock are entitled to vote on all matters, together with the holders of common stock, and have the equivalent of ten thousand (10,000) votes for every share of Series B Preferred Stock held.

Liquidation. Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary, the holders of Series B Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the liquidation value of the Series B Preferred Stock before any distribution or payment shall be made to the holders of any junior securities, and if the assets of the Company is insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of the Series B Preferred Stock shall be ratably distributed among the holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.

During the three months ended March 31, 2025 and 2024, there were 0 and 8,032 shares of Series B Preferred Stock converted into 0 and 80,320,000 shares of common stock, respectively.

During the three months ended June 30, 2025 and 2024, there were 13,646 and 3,500 shares of Series B Preferred Stock converted into 136,460,000 and 35,000,000 shares of common stock, respectively.

During the three months ended September 30, 2025 and 2024, there were 0 and 1,415 shares of Series B Preferred Stock converted into 0 and 14,150,000 shares of common stock, respectively.

During the three months ended December 31, 2025 and 2024, there were 0 and 17,837 shares of Series B Preferred Stock converted into 0 and 178,370,000 shares of common stock, respectively.

As of December 31, 2025, the Company has 335,445 shares of Series B Preferred Stock issued and outstanding.

Series C Preferred Stock

On October 24, 2023, the Company filed a Certificate of Designation with the State of Delaware to designate 20,000 shares to be authorized for Series C Preferred Stock.

The criteria established for the Series C Preferred Stock was as follows:

Dividends. Shares of Series C Preferred Stock shall not be entitled to receive any dividend.

Conversion. (a) Automatic Conversion – upon such time the Company shall become listed on a national securities exchange, the Series C Preferred stock shall automatically convert into shares of the Company’s common stock at a conversion price equal to a 25% discount to the public offering price, if the uplist occurs in connection with an underwriters effective registration statement registering the offer and sale of the Company’s common stock, or, in the event that the uplist occurs without a public offering, then the conversion rate shall be a 25% discount to the opening trading price on such national securities exchange. In connection with a public offering, each holder hereby consents to a cutback and/or lockup not to exceed 180 calendar days of its as-converted common stock if such cutback and/or lockup is required by the underwriter of the public offering; and (b) Voluntary Conversion – after the two year anniversary of the issuance of any share of Series C Preferred Stock, and provided that an uplist has not been consummated, the holder may convert their shares of Series C Preferred Stock, at their sole and absolute discretion into shares of common stock at the then fair market value of the common stock.

Redemption. The Series C Preferred Stock shall not be subject to mandatory redemption.

Voting Rights. Holders of Series C Preferred Stock shall have no voting rights.

Liquidation. In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary (“Liquidation Event”), before any distribution or payment shall be made to the holders of the Series C Preferred Stock, and after the distribution or payment to the Series A Preferred Stock and Series B Preferred Stock, in accordance with their respective terms, the holders of the Series C Preferred Stock shall be entitled to receive an amount per share equal to the sum of the initial issuance price applicable to such Series C Preferred Stock for each outstanding share of Series C Preferred Stock plus any declared but unpaid dividends on such share. The initial issuance price shall mean $1,000 per share (as adjusted for stock splits, stock dividends, recapitalizations, and similar transactions). If upon, any Liquidation Event, the assets of the Company shall be insufficient to make payment in full to the holders of the Series C Preferred Stock of the applicable Liquidation Preference, then such assets shall be distributed among the holders of the Series C Preferred Stock at the time outstanding, ratably in proportion to the full preferential amounts to which they would otherwise be entitled.

In the period October 24, 2023 through December 31, 2023, the Company issued 12,280 shares of Series C Preferred Stock for cash, exchange of debt and exchange of warrants.

During the three months ended June 30, 2024, the Company issued 70 shares of Series C Preferred Stock in connection with financing activities.

During the three months ended March 31, 2025, there were 758 shares of Series C Preferred Stock exchanged into 3,000,000,000 shares of common stock. The Company lost $562,000 in the exchange. In addition, 30 shares of Series C Preferred Stock were issued in an exchange of warrants for common stock. This is reflected as a deemed dividend in the consolidated financial statements.

During the three months ended June 30, 2025, there were 197 shares of Series C Preferred Stock exchanged into 985,000,000 shares of common stock. The Company lost $98,500 in the exchange. This is reflected as a deemed dividend in the consolidated financial statements.

During the three months ended September 30, 2025, 8,904 shares of Series C Preferred Stock were cancelled in an exchange of units held in TAP HoldCo.

During the three months ended December 31, 2025, 220 shares of Series C Preferred Stock were converted into 2,200,000,000 common shares.

As of December 31, 2025, there are 2,301 shares of Series C Preferred Stock issued and outstanding.

Series D Preferred Stock

On July 16, 2024, the Company designated a new Series D Preferred Stock and authorized the issuance of up to 250,000 shares of this new series. The Series D Preferred Stock is not convertible into common stock and each share issued enables the holder to vote at a ratio of 500,000 common votes for 1 share of Series D Preferred Stock. Also on July 16, 2024, the Company issued 100,000 shares of Series D Preferred Stock to their CEO for compensation. The value of these shares is $250,000 as this value represents typical CEO compensation for a one-year period.

Common Stock

The Company has 85,000,000,000 shares of common stock, par value $0.00001, authorized as of May 21, 2025, increased from 50,000,000,000. The Company has 53,618,782,943 and 32,748,842,520 shares issued and outstanding as of December 31, 2025 and 2024, respectively. On May 26, 2023 the Board of Directors agreed to increase the number of common shares authorized from 7,450,000,000 shares to 12,500,000,000 shares. The stockholders approved this action on May 29, 2023. This action became effective on July 27, 2023. On January 26, 2024, the Board of Directors agreed to increase the authorized common shares to 22,500,000 shares. On October 1, 2024, the Company increased its authorized common shares to 50,000,000,000 shares pursuant to the Definitive 14C filed in September 2024. On May 21, 2025, the Company increased its authorized common shares to 85,000,000,000 pursuant to the Definitive 14C filed April 30, 2025.

In the three months ended March 31, 2024, the Company: (a) issued 50,000,000 shares for services rendered valued at $40,000; (b) 1,174,627,010 shares for conversion of notes payable and accrued interest valued at $994,701 that includes a loss on conversion of these shares in the amount of $331,905; (c) 589,950,000 shares of common stock in a cashless exchange of warrants; and (d) issued 80,320,000 shares of common stock in conversion of 8,032 Series B Preferred shares.

In the three months ended June 30, 2024, the Company: (a) issued 40,000,000 shares for services rendered valued at $28,000; (b) 2,658,126,241 shares for conversion of notes payable and accrued interest valued at $1,531,152 that includes a loss on conversion of these shares in the amount of $931,608; (c) 350,000,000 shares of common stock in a cashless exchange of warrants; and (d) issued 35,000,000 shares of common stock in conversion of 3,500 Series B Preferred shares.

In the three months ended September 30, 2024, the Company: (a) issued 55,000,000 shares for services rendered valued at $20,500; (b) 1,907,115,384 shares for conversion of notes payable and accrued interest valued at $527,924 that includes a loss on conversion of these shares in the amount of $263,948; (c) issued 14,150,000 shares of common stock in conversion of 1,415 Series B Preferred shares; and (d) 700,000,000 shares in a settlement with a former consultant valued at $210,000.

In the three months ended December 31, 2024, the Company: (a) issued 70,000,000 shares for services rendered valued at $14,000; (b) 10,825,853,467 shares for conversion of notes payable and accrued interest valued at $5,458,193 that includes a loss on conversion of these shares in the amount of $3,398,459; (c) issued 178,370,000 shares of common stock in conversion of 17,837 Series B Preferred shares; and (d) 2,756,901,195 shares in a settlement with a former consultant valued at $636,380.

In the three months ended March 31, 2025, the Company: issued (a) 1,150,000,000 shares for an accrued expense valued at $1,380,000; (b) 634,431,833 shares in exchange for warrants valued at $220,079, which represents a deemed dividend. The Company received $111,000 for the warrants in April 2024; (c) 2,258,024,833 shares for conversion of notes payable and accrued interest valued at $1,154,152 that includes a loss on conversion of these shares in the amount of $577,315; and (d) issued 3,000,000,000 shares of common stock in exchange of 758 Series C Preferred shares, and the Company recognized a deemed dividend of $562,000 in the exchange.

In the three months ended June 30, 2025, the Company: issued (a) 937,598,591 shares for conversion of notes payable and accrued interest valued at $281,280 that includes a loss on conversion of these shares in the amount of $176,541; (b) 985,000,000 shares of common stock in exchange of 197 Series C Preferred shares, and the Company recognized a deemed dividend $98,500 in the exchange; (c) 136,460,000 shares of common stock in conversion of Series B Preferred shares for 13,646 shares of Series B Preferred shares; (d) 1,500,000,000 shares of common stock in a settlement valued at $450,000; and (e) 666,666,666 shares of common stock originally valued at $200,000 to two of the principals of Multicortex as required under the Joint Venture Agreement, however, this agreement was terminated July 21, 2025 and thus has no economic value. The shares are in process to be cancelled.

In the three months ended September 30, 2025, the Company: issued (a) 4,062,068,966 shares for conversion of notes payable and accrued interest valued at $1,182,413 that includes a loss on conversion of these shares in the amount of $876,414; and (b) issued 850,000,000 shares in a settlement with our former CEO. The Company also cancelled 666,666,666 shares of common stock to two principals of Multicortex previously issued in the three months ended June 30, 2025.

In the three months ended December 31, 2025, the Company: issued (a) 3,156,356,200 shares for conversion of notes payable and accrued interest valued at $830,261 that includes a gain on conversion of these shares in the amount of $44,080; and (b) issued 2,200,000,000 shares in conversion of 220 Series C Preferred Shares. In addition, the Company recorded $200,000 in stock to be issued in a convertible note conversion. The shares were issued in January 2026.

Stock Incentive Plan

On July 21, 2021, the Company established the 2021 Stock Incentive Plan (the “Plan”) for a total issuance not to exceed 20,000,000 shares of common stock. The purpose of the Plan is to promote the long-term growth and profitability of the Company by (i) providing key people with incentives to improve stockholder value and to contribute to the growth and financial success of the Company, and (ii) enabling the Company to attract, retain and reward the best-available persons.

The Plan permits the granting of Stock Options (including incentive stock options qualifying under Code Section 422 and nonqualified stock options), Stock Appreciation Rights, restricted or unrestricted Stock Awards, Restricted Stock Units, Performance Awards, other stock-based awards, or any combination of the foregoing.

Warrants

Warrants issued in 2025 and 2024 consisted of the following:

On January 31, 2024, the Company issued 100,000,000 warrants with a strike price of $0.001 that expire January 31, 2027 in the issuance of a note payable.

On February 12, 2024, the Company issued 25,000,000 warrants with a strike price of $0.001 that expire February 12, 2027 in the issuance of a note payable.

On March 12, 2024, the Company issued 50,000,000 warrants with a strike price of $0.001 that expire March 12, 2027 in the issuance of a note payable.

On March 26, 2024, the Company issued 50,000,000 warrants with a strike price of $0.001 that expire March 26, 2027 in the issuance of a note payable.

On April 8, 2024, the Company issued 75,000,000 warrants with a strike price of $0.0008 that expire April 8, 2027 for $111,000. These were exchanged for 634,431,833 shares of common stock in March 2025, representing a $109,329 loss on exchange. In addition, 30 shares of Series C Preferred Stock were issued in this exchange.

On April 16, 2024, the Company issued 50,000,000 warrants with a strike price of $0.001 that expire April 16, 2027 in the issuance of a note payable.

On May 22, 2024, the Company issued 500,000,000 warrants with a strike price of $0.0006 that expire May 22, 2029 in the issuance of a note payable.

On May 24, 2024, the Company issued 45,000,000 warrants with a strike price of $0.00075 that expire May 24, 2029 in the restructuring of a note payable.

During the years ended December 31, 2025 and 2024, 155,509,804 and 263,000,000 warrants were exchanged or expired.

The following represents a summary of the warrants:

SCHEDULE OF WARRANTS ACTIVITIES

As of December 31, 2025, 1,578,000,000 warrants are vested.

For the years ended December 31, 2025 and 2024, the Company incurred stock-based compensation expense of $3,826,479 and $3,826,479, respectively for the warrants in accordance with ASC 718-10-50-1 and ASC 718-10-50-2. The fair value of the grants was calculated based on the black-scholes calculation using the assumptions reflected in the chart below for both the service-based grants and the performance-based grants.

As of December 31, 2025, there remains unrecognized stock-based compensation expense related to these warrants of $1,489,138 comprising of service-based grants through June 30, 2026.

The Company recorded $539,817 in interest expense related to previously issued warrants.

Options

As of December 31, 2025, 5,000,000 of the May 26, 2022 options as well as 630,000 options issued in 2021 have been forfeited. As of December 31, 2025, 1,878,660,000 options are exercisable.

SUMMARY OF STOCK OPTION  

For the years ended December 31, 2025 and 2024, the Company incurred stock-based compensation expense of $225,000 and $26,441, respectively for the options in accordance with ASC 718-10-50-1 and ASC 718-10-50-2. The fair value of the grants was calculated based on the Black-Scholes calculation using the assumptions reflected in the chart below for the service-based grants.

In September 2025, the Company granted 1,875,000,000 stock options to their three directors. The options have a term of 10 years and the exercise price was the stock price on the date of grant.

Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each option/warrant is estimated using the Black-Scholes valuation model. The following assumptions were used for the periods as follows:

SUMMARY OF FAIR VALUE VALUATION TECHNIQUES

Restricted Stock Units (RSUs)

On February 12, 2022, the Company granted 26,800,000 RSUs in the acquisition of the asserts of BizSecure that was recorded as contingent consideration. These RSUs commenced vesting on April 1, 2022.

SCHEDULE OF RESTRICTED STOCK

On December 30, 2022, the Company and BizSecure negotiated a settlement of all claims resulting from the Company’s inability to timely register the 13,200,000 shares of common stock issued February 12, 2022 and 10,050,000 RSUs that vested during 2022. As a result, the 13,200,000 shares of common stock and the 10,050,000 RSUs were rescinded effective December 30, 2022. The remaining 16,750,000 RSUs will continue to vest in accordance with the original terms and the Company will continue the process to get those RSUs registered for resale and re-negotiate the terms of the common shares to be issued to BizSecure. For the year ended December 31, 2023, 13,400,000 RSUs vested. In 2023 6,700,000 of these shares were issued for the vested RSUs. For the year ended December 31, 2024 3,350,000 RSUs vested, and no shares were issued for vested RSUs.

For the year ended December 31, 2024, the Company amortized $565,815 of the contingent consideration to additional paid in capital, respectively for the RSUs.